Wedgwood - Cultural Differences in the United Kingdom, Japan, and the United States of America - Case Study Example

Wedgwood Case Study Cultural Differences in UK, Japan and the USA Implications for International Marketing Strategy and Practice School Introduction Waterford Wedgwood, the iconic traditional luxury brand for porcelain and bone china tableware, is facing a number of challenges that arise from changes in its international marketing environment and reflect social and cultural shifts among consumers. Three of the markets that account for 80% of Wedgwood's sales, UK, US and Japan, face gradually changing social and lifestyle behaviours - increase in single and cohabiting couples, decrease in the number of marriages, more single women, fashion-oriented youth, lower involvement in the traditional aspect of purchasing presents and conventional local ceremonies. Change in the Wedgwood international marketing strategy is imminent. The company has to assess and redefine its strategy in terms of market segments, targeting and brand positioning. Wedgwood's management have to balance between the pressing costs in the competitive luxury market and the changing demand structure for more casual and contemporary tableware products. A key issue for the company is the positioning strategy for the products; whether it should sustain the luxury image line or give in to modern design trends in order to broaden its target markets. This paper critically analyzes the influence of cultural environmental changes on Wedgwood's international marketing strategy in UK, Japan and USA. In the end, the paper summarizes a range of proposed strategies for the Wedgwood brands. 2. Cultural framework Traditionally the houseware and specialties market, including the tableware market, has been characterized by slow yet steady market growth (Morgan et al, 2005). The compound annual growth rate for the market between 2000 and 2004 is 5.1% (Datamonitor, 2005). The market performance, respectively Wedgwood's sales have been driven by some strong consumer shopping preferences and spending patterns in several of the world's developed economies (Datamonitor, 2005). Internationally, Wedgwood operates in eastern (Japan) and western (Europe and USA) markets that have different cultural characteristics in terms of language, religion, and context in communications, values and many other aspects. For a product category like tableware that is culture-dependent, the socio-cultural aspects in Japan, United Kingdom and USA exercise key influence on local demand. These factors determine local branding and positioning and should guide Wedgwood in developing local marketing and communications strategies. The cultural elements that shape demand are grouped by Geert Hofstede according to five large dimensions - power distance, individualism and collectivism, masculinity and femininity, uncertainty avoidance and long versus short term orientation (Wikipedia, Geert Hofstede, 2006). All the three markets are masculine cultures (Wikidedia, Geert Hofstede, 2006), which reflects in more assertive behaviour, and visible search for achievements and self-expression (Wikipedia, Masculine and Feminine Cultures, 2006). The US market is characterized to be the most individualistic culture, whereas Japan is characterized by Hofstede as a collectivistic culture of the so called "community man" (Wikipedia, Collectivist and Individualist cultures, 2006). Still, social and economic changes in the Japanese society, "the end of guaranteed lifetime employment, [] and the loss of confidence in Government and financial institutions []" have shifted the collectivistic behaviour towards greater expressed individuality and customization. What this means to Wedgwood is that it is increasingly facing similar demographic and cultural patterns on a global scale. Cultural changes are reflected in the need for self-expression, uniqueness and independence (Wikipedia, Collectivism and Individualism Cultures, 2006). Consumers look for products that closely fit their lifestyle and express their individuality better. Casual dining, frequent eating out, the decrease in importance of the social institution of marriage all shape the demand for less formal tableware on all three continents. The consumer market has turned more experimental, people look for new experiences, hence increasingly purchase tableware products "that enhance their home dining experiences" (Morgan et al, 2005). Moderate-income shoppers all over the world tend to prefer mass merchants and discounters in purchasing tableware and spend less on luxury as compared to the past (Morgan et al, 2005). Alternatively, affluent consumers increase their spending on dinnerware, not necessarily for luxury products, but rather for "casual luxury" products that they use and enjoy. Other aspects that bring the British and Japanese markets together are similar customs and traditions that substantiate natural demand for porcelain and bone china, arising from the cultural heritage of traditional tea ceremonies in Japan and tea drinking habits in UK. For these cultures luxurious tableware is part of the living traditions and a first-choice present for many age groups, and Wedgwood has been extremely successful there, being number one and a safe choice for fine china brand both in Japan and UK. 3. Implications for international marketing strategy 3.1 Segmentation Segmentation models in the tableware industry follow different criteria in trying to identify a target market segment that is measurable, accessible, and large enough to sustain profits (CIM, 2003). Whereas formal statistics use segmentation criteria that can be measured and tracked - like life stage, lifestyle and demographic profile - these seem to be insufficient to identify the right blend of customers for companies like Wedgwood. Other aspects, such as geographic location, usage, occasions, or fashion-orientation seem relevant in determining market demand. The implementation of segmentation criteria is important, because it helps Wedgwood keep track of official market data on one hand, and on the other, it's a starting point for Wedgwood's targeting and positioning strategy. Wedgwood customers all over the world range from individuals, purchasing wedding or anniversaries gifts; to people with large incomes, and to antique collectors. One general criterion for segmenting Wedgwood's markets is geographic location. Markets like US and Japan are of strategic importance to the company, because they represent more than 60% of total sales. This high dependence on international sales means that in its international marketing Wedgwood needs to devise careful strategies that take into account local market specifics, especially cultural characteristics. The "customs and traditions" element in purchasing tableware in Japan and UK is much stronger as compared to the US market; still global demographic trends tend to leverage those differences. Demographic criteria based on age, sex, income and family composition (CIM, 2003, pp. 80-82) are another important segmentation model. According to Key Note statistics (2005), over the last 35 years household income has risen, but also income inequality has widened. Rising income and widening inequality for Wedgwood's exclusive product ranges means a wealthy target market that is more geographically concentrated, hence easier to access. Women are of specific interest for the luxury manufacturer and retailer. It's not only that women are decision makers for tableware products; it's also the size of the market segment and their spending power that attracts particular interest. For example the fact that in Japan there are 10 million single women aged 25-34 living with their parents means that there are 10 million women who spend the majority of their budget on themselves, purchasing fashionable, luxurious, personal products. This is a market segment worth targeting. Other interesting segments, based on the family life cycle segmentation (CIM, 2003, p. 80), are "empty nesters" or childless couples in Europe and USA that can afford the premium-priced products. Demographic criteria, such as age, shape the psychographic segmentation model, meaning lifestyle, activities or interests (CIM, 2003, p. 84). For example, younger consumers do not perceive luxury pottery as relevant to their lifestyles and manufacturers are increasingly turning attention to more contemporary ranges that fit into the lifestyle of Generation X (Key Note, 2005). Similarly, in looking for tableware for personal use, young women today are "opting for patterns that work for both everyday and special occasions and rejecting any brand that can't travel directly from the table to the dishwasher" (Morgan et al, 2005), looking for good looks, but also function and convenience. Hence, the reduced numbers of marriages in UK, US and Japan; and the increasingly popular casual dining have reduced the size of the segment based on formal occasions and usage. Consequently demand for formal tableware has fallen, or rather shifted to other product categories, like more informal tableware pieces. It turns that demographic segmentation criteria shape cultural and behavioural models for customers in different countries. Age, income and lifestyle determine purchasing frequency, occasion and types of products and in its future marketing strategy Wedgwood needs to consider these aspects for effective positioning. 3.2 Targeting and brand positioning Through a differentiated marketing approach the company has been targeting different segments - by offering china tableware, home dcor, children's ware, jewellery. Still, as regard its core tableware business, Wedgwood has rather followed a concentrated marketing approach (CIM, 2003, pp. 86-87) for all market segments. There are differences in the perceived brand image in the different countries. In a positioning grid that varies according to consumer culture, in US and Japan Wedgwood is positioned as the luxurious British brand. In Japan, because of extensive distribution coverage, it's too available to be exclusive, whereas in US it's more traditional and classic rather than modern. In UK the Wedgwood brand is positioned among consumers as one of the oldest truly local brands. Still, for all countries Wedgwood has been targeting the wealthy, traditional-bound, safe choice consumer segments through positioning as a luxurious traditional British brand, "associated with formal dining at home" (Britt, 2005). Adapting to global cultural trends, the Wedgwood brand today tries to put on a more contemporary, stylish brand image. As a response to decreasing sales numbers and falling margins in 2005, the company has undertaken to focus on more productive lines and invest in "classic and contemporary product streams", along with other focused marketing programmes (Britt, 2005). Currently the Wedgwood brand is expanding its presence to more and more market segments to use a differentiated marketing approach (CIM, 2003, p. 86). Such a strategy is expected to widen the product range of the company within different market segments. On the product and promotion side, Wedgwood has had variable success in modernizing its brand image - by including sub-brands such as bone china designed by Jasper Conran or earthenware designed by Stephen Webster (Britt, 2005). Co-branding agreements with Versace (Datamonitor, 2004) have intended to complement and modernize the Wedgwood brand. In order to distinguish between the premium and the lifestyle lines, in Japan the company has introduced separate distribution channels and individual brand names (CIM, 2003, p. 143) for the exclusive Wedgwood china tableware and the more casual products - respectively a limited number of department stores and "My life" boutiques respectively. Such a repositioning strategy raises the questions of what the brand is intended to mean to various market segments and carries the risk of brand image dilution. As Kappeler has stated, the company needs "to balance" between modernization and the need to preserve "the rich English heritage" (Datamonitor, 2004) that is associated with the brand. The Wedgwood brand has a strong history of excellence and enjoys over 250 years of brand value (Datamonitor, 2004). The company has pursued its repositioning strategy for over a decade now (Datamonitor, 2004), still, "the strength of the Wedgwood brand" (Britt, 2005) is in its history and old-England attributes. The best evidence of the strong association of the brand with English culture is consumer reaction to shifted production sites to China. Intensive competition in the crystal, premium cookware and luxury gifts market (Datamonitor, 2004) has pressed Wedgwood to cut down costs and reallocate production into cheap labour markets to remain competitive. Reallocated production abroad raised two major concerns among customers - one is the loss of quality (Carroll et al, 2002) associated with inferior technology, lower standards and deteriorated manufacturing settings. The other concern is about the loss of an emotional relationship with a home manufactured brand that carries the traditional British spirit. Hence, shifting production sites outside UK has made brand positioning less believable and less effective (CIM, 2003, p. 88). For a premium quality luxurious brand like Wedgwood production site is an important element of the product image and is a perceived guarantee for higher quality and genuine UK origin. 4. Recommended practice for Wedgwood Strategic decisions about the future of the Wedgwood brand should incorporate on one hand market dynamics in terms of socio-cultural and political-economic developments in international markets, and on the other hand should be created around the core strengths and advantages of the Wedgwood products. There is no single best choice of action, still any brand positioning or repositioning strategy would require not only impressive marketing and communications campaigns, but also a whole transformation of the marketing mix strategy, affecting product design, pricing, distribution and promotion. 4.1 Marketing mix adaptations for the luxury brand Wedgwood should continue to identify and evaluate internationally local market trends in terms of changing cultural elements and consumption habits. At present there are mixed market signals about the luxury segment. It is growing, but also changing in its structure, as occasion-related purchases of expensive china tableware are decreasing. At the same time world wealth is growing, but is concentrated into fewer people, respectively fewer markets, which forces the luxury segment to appear more exclusive on the market. On this segment Wedgwood should keep its strong market positions in UK, US and Japan, by adapting its marketing mix to cultural differences. For example, the shift towards fewer department stores in Japan is a move in the right direction. Price and quality association should remain an integral part (CIM, 2003, p. 91) of the Wedgwood brand image. The brand should continue to be the first choice for exclusive gift purchases and collectors, and should expand to new target segments. The growing number of consumers within the elderly age group, for example, represents a market segment that is more likely to favour the traditional Wedgwood image. The luxury market can also appeal to the lifestyle-oriented market segment through brand repositioning. For this market the company should not modernize its baseline Wedgwood brand, but rather use its strengths and instead of focusing on the product itself, "embrace the new experience of luxury" (Morgan et al, 2005). This means that for the lifestyle oriented, experience-searching consumers the luxury Wedgwood line can be positioned to convey a luxury experience. Moderate brand renovation through merchandising or joint venture co-branding campaigns (CIM, 2003, p. 146) can support the prestige Wedgwood image, but should be done with care, because too much modernization can have the negative effect of brand dilution among core target groups and this will impair the image of the brand, and consequently sales. 4.2 Marketing mix adaptation for lifestyle brands Next to the luxury market, Wedgwood should consider the growing demand for casual life style products. The brand modernization strategy the company has been following for years now should be focused on those brands that are destined for the wealthy, contemporary youth, stressing on the quality of the Wedgwood brand. The repositioning strategy can stress on the quality of the Wedgwood family brand and introduce new contemporary product ranges in collaboration with famous artists and designers. Such brands, for example products offered in "My Life" boutiques in Japan, can be further extended to other lifestyle product categories, such as cookware, bake ware, dinnerware, cutlery and other (Datamonitor, 2005). Similar outlets can be introduced in other key markets like UK and US, following the Japanese success. In all cases, distribution and merchandising for casual tableware should be separated from the luxurious lines and should convey a modernized image. Unlike a premium pricing strategy that supports the Wedgwood's luxurious positioning, for the lifestyle products prices should be adapted towards a market that looks for greater variety. The concept of modern casual tableware at the cost of a luxurious brand does not necessarily send mixed signals to consumers; still, price adjustment will communicate a message that provokes more frequent purchases and usage of a brand that is closer to the consumer lifestyle. 5. Conclusion The rationale behind the proposed strategy for a differentiated marketing approach is simple. The Wedgwood sub-brands should convey straightforward messages to the distinct market segments, and each brand or product line should be positioned through a separate marketing mix adaptation. This is so, because the symbiosis between luxury and fashion in a brand is hard to achieve. "The worlds of fashion and luxury play by diametrically opposed rules", the fashion world is one "in which the designer is more important than the brand" (Britt, 2005). Therefore the rejuvenation of the Wedgwood luxury brand through modernization should be done carefully. Through the introduction of separate brands to cover different market segments, Wedgwood can obtain the balance between the promises of the traditional Wedgwood china tableware and of the modern lifestyle product lines. References 1. Britt, B. (2005) "Brand Health Check: Waterford Wedgwood" Marketing. May 18 2005. Haymarket Business Publications Ltd. p. 24 2. Carroll, M., Cooke, F., Hassard, J., Marchington, M. (2002) "The Strategic Management of Outsourcing in the UK Ceramic Tableware Industry" Competition & Change. Volume 64, pp. 327-343. 3. CIM (2003) "Marketing Communications" Study Text. BPP Professional Education. London: Aldine House 4. Datamonitor (2004) "Waterford Wedgwood plc. Company Profile" 1 February 2004 5. Datamonitor (2005) "Global Housewares & Specialties. Industry Profile" May 2005 6. Key Note (2005) "Glassware - Market Report 2005" Published December 2005, Abstract Retrieved May 1, 2006 from http://www.mindbranch.com/listing/product/R310-1264.html 7. Morgan, M. & Danziger, P. (2005) "Heading Toward Casual Luxury" Gourmet Retailer October 2005, Volume 26, Issue 10, p. 43 8. Wikipedia contributors (2006) "Geert Hofstede" Wikipedia, the Free Encyclopedia, Retrieved May 3, 2006 from http://en.wikipedia.org/w/index.phptitle=Geert_Hofstede&oldid=51118897 9. Wikipedia contributors (2006). "Collectivist and individualist cultures." Wikipedia, The Free Encyclopedia. Retrieved May 3, 2006 from http://en.wikipedia.org/w/index.phptitle=Collectivist_and_individualist_cultures&oldid=51271813. 10. Wikipedia contributors (2006). "Masculine and feminine cultures." Wikipedia, The Free Encyclopedia. Retrieved May 3, 2006 from http://en.wikipedia.org/w/index.phptitle=Masculine_and_feminine_cultures&oldid=42225018 Read More